Imagine for a moment that you are a store owner and even though it’s opening day, you haven’t purchased inventory. If your mind sent you to a bricks-and-mortar store, you’re likely in a panic and picturing a store with aisles of barren shelves — not a good look. However, a quick shift to online retail, and the possibilities become more realistic. How, you may ask? Reddit entrepreneurs can’t stop talking about the answer — drop shipping.
What Is Drop Shipping?
At a basic level, drop shipping is a fulfillment method that allows online retailers to sell products without purchasing inventory first. Instead, the retailer will partner with a wholesaler or shipping supplier and list their items for sale. The products are then shipped directly from the wholesaler and the retailer pays for them once the order is processed.
The Entrepreneur subreddit has been flooded with posts about how to make this business work for the tech-savvy entrepreneurs looking to use their marketing and SEO skills to build a small business. Drop shipping pros consistently post advice, share their business model and the types of products that work successfully for the strategy.
The business model is attractive for a number of reasons, but the big draw is the low upfront cost. You likely won’t need to max out your credit cards, apply for a microloan or turn to alternative financing like peer-to-peer loans in order to fund your business at the start because you don’t have to purchase the supply before you make a sale. Which is great for aspriring entrepreneurs with bad credit or those who haven’t established a business credit score yet. (You can check your personal and business credit scores for free on Nav.)
Can you get in on the trend too? Here are a few things you should consider before you open for business.
1. Drop shipping can be labor intensive.
Before you begin, you’ll need to have time to do your fair share of research. Once things are up and running, you’ll need to monitor metrics, build relationships with your wholesalers and maintain brand credibility, which means developing ways to increase your customer base, stay abreast of marketing trends and address customer issues in a timely and efficient manner.
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2. Picking the right sellers to partner with is crucial.
Partnering with the right seller is essential if you want to keep your customers happy. If the seller you work with has faulty, broken or cheaply made merchandise or if their packaging and shipping methods leave much to be desired, the onus will fall on your brand, not them.
For that reason, it’s worth spending plenty of time combing through some of the multiple Reddit threads about drop shipping. Here, you’ll be able to see feedback about which sellers are great and which ones cause headaches and bad customer reviews.
3. Find your product niche.
Step back from your entrepreneurial dreams for a moment and consider your own desires as a consumer. Who do you do business with and why? It’s likely that you are attracted to certain merchants because of what they offer and how they offer it. Is it because they sell great products at fair prices? Unique items that you can’t find elsewhere? Perhaps you like the community or information they offer in addition to the products.
Sometimes the products, hobbies or businesses you know the most about are the perfect place to start your search. From there, you’ll want to turn to places like Google Trends or even eBay to look for product trends like mid-century modern furniture or modern kitchenware that are taking off.
4. Build and maintain your brand.
You can partner with the best seller out there, but if your website is nothing more than products for sale, then you may find that you have trouble gaining traction. Be prepared to be active when you build your brand and to remain that way even when business is great.
When it comes to building your brand, there is no time to rest on your laurels. Tomas Slimas, a successful drop shipper who recently posted to Reddit about how he sold his company after hitting a yearly revenue of $3 million, regularly used a portion of his profits to advertise.
Of course, that doesn’t mean you should go into debt to immediately boost your brand through advertising, but it does mean you’ll need to find the best way to advertise within your budget.
5. Slow and steady may very well win the race.
In the beginning, before you build trust with sellers and customers alike, drop shipping can be risky. Shipping, which is notably longer for drop shipping, can fall through or products can go out of stock. To avoid some potential pitfalls that can tether your company to the ground before it takes off, Slimas recommends that retailers to avoid major outrages by “not aggressively selling new/unknown products or products from unknown suppliers.”
Going slow and testing the waters can help you determine what kind of relationship you can expect with your seller as well as product availability. Once these items become clear, amp up your efforts.
6. Have a customer service plan of action.
Think back on all the times you’ve been a consumer and your expectations for the product or service weren’t met. Chances are, if the merchant or vendor worked with you to address the issue as quickly and transparently as possible, you considered doing business with that retailer again.
However, if your issues weren’t addressed, you likely ended that relationship. Today, the internet provides business owners with multiple opportunities for quick growth, but it also provides consumers with a quick and effective outlet to share their poor experiences with your potential customer base.
Drop shipping can provide willing entrepreneurs with a unique opportunity to grow without the overhead cost associated with purchasing inventory or operating a brick and mortar store. And with the right approach, it can be a lucrative venture. The best course of action is to do your research before you dive in. Chat with some drop shippers and check in on the hot Reddit threads to identify the best (and worst) approaches for today’s competitive market.
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